The economy shrank at a 6.1 per cent pace at the start of this year as sharp cutbacks by businesses and the biggest drop in U.S. exports in 40 years overwhelmed a rebound in consumer spending. The Commerce Department's report dashed hopes that the recession's grip on the country loosened in the first quarter. Economists surveyed by Thomson Reuters expected a five per cent annualized decline. Instead, the economy performed nearly as bad as it had in the final three months of last year when it contracted at a 6.3 per cent pace, the most in a quarter-century.
The Federal Reserve says it sees signs the recession may be easing but warns the economy is likely to remain weak. Against that backdrop the Fed held its key lending rate at a record low of between zero and 0.25 per cent. It also decided against taking any new steps to shore up the economy. The Fed says the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Aggressive action already taken should help bolster the economy, although the Fed left the door open to future action if needed.
President Barack Obama's Democratic allies in the House have passed a $3.555 trillion budget outline that will help him pass health care reform later in the year. Not a single Republican backed the plan, which passed by a 233-193 vote. It predicts deficits peaking at $1.7 trillion this year, dropping to $523 billion after five years. Democrats noted that Obama inherited a fiscal crisis stemming from the deep recession, home foreclosures and the Wall Street meltdown. Republican Congressman Kevin Brady of Texas says the budget will raise taxes by $1.5 trillion and double the national debt in just five years.
"My worry is that this Obama-Democrat budget guarantees red ink for decades, that we may never see a balanced budget in our lifetime if this budget passes. Texans I know are growing increasingly worried about our unprecedented spending spree. You know, the president's budget and the Democrat budget that we're talking about tonight raises taxes. It explodes spending and it heaps on mountains of new debt for the next decade."
Brady says the interest payments on this new debt will cost taxpayers $1 billion a day, and by 2014, the debt will rise to two-thirds of the American economy.
Unemployment rates rose in all of the nation's largest metropolitan areas in March, with Indiana's Elkhart-Goshen once again logging the biggest gain. The Labor Department says all 372 metropolitan areas tracked saw jobless rates move higher last month from a year earlier. Elkhart-Goshen's rate soared to 18.8 per cent, a 13 percentage-point increase. The second-biggest gainer: Bend, Oregon, where the jobless rate jumped to 17 per cent, a 9.2 percentage-point rise. Rounding out the top three was North Carolina's Hickory-Lenoir-Morganton, which saw its unemployment rate rise to 15.4 per cent, an increase of 9.1 percentage points. The government said 18 regions registered jobless rates of at least 15 per cent. Meanwhile, 15 regions had rates below five per cent, including Lubbock.
Clear Channel Communications has announced a new round of layoffs, cutting 590 jobs in its radio division, or 2.7 per cent of its work force. Some of those cuts affect Houston radio stations, in programming, engineering and customer service. The cuts follow a round of layoffs—some 1,850 workers in January, largely in sales. Nationally syndicated shows will replace many of the local shows that are canceled. Clear Channel is also suspending matching contributions to retirement accounts. Thomas H. Lee Partners and Bain Capital Partners took the company private in a $20 billion deal last year, and hope to trim about $400 million in costs.
Comcast is hiring nearly 200 workers in Houston, according to the Houston Business Journal. The positions are in sales, marketing, customer service, dispatch, technical operations, information technology, engineering and human resources. The Philadelphia-based firm currently employs 2,700 in the Houston area.
More than 50 million retirees can expect to receive $250 payments from the government in the next few weeks. It's their share of the economic stimulus package enacted in February. Economists say the payments will be a timely boost just as the recession is showing signs of easing a little. The payments are part of the $787 billion package of spending and tax cuts enacted to help boost the economy. They will go to people who receive social security, supplemental security income, railroad retirement or veteran's disability benefits. The payments are meant for people who did not qualify for the new "making work pay" tax credit that provides up to $400 to individuals and $800 to couples. Taxpayers who would otherwise qualify for both will have the $250 payments deducted from their tax credits.
Shareholders at a small but growing number of companies will be voting on proposals to ditch Delaware or other states and incorporate in North Dakota. ExxonMobil, Continental Airlines and Southwest Airlines,/strong> are among the latest companies to announce that shareholders will vote on resolutions to make the switch. In most cases, management opposes the change. Two years ago, lawmakers in North Dakota passed an incorporation law designed to be more shareholder-friendly than laws in Delaware, where most U.S. companies are incorporated. If companies trek to North Dakota, it could generate filing fees for the state and new work for lawyers in the capital of Bismarck.
American Community Newspapers, which operates smaller community newspapers in four major U.S. markets, has filed for bankruptcy protection. The company filed its Chapter 11 petition in U.S Bankruptcy Court in Delaware, becoming the sixth publisher of daily newspapers to file for bankruptcy protection. The company said its secured creditors will provide a $5 million debtor-in-possession credit facility. In its filing, the company lists assets in the range of $50 million to $100 million and debts of $100 million to $500 million. The Dallas-based newspaper group has 86 newspapers, including three dailies, and 14 niche publications in the Dallas area, as well as in the Minneapolis, Columbus, Ohio, and northern Virginia areas.
Chrysler CEO Robert Nardelli says the automaker is making progress with one day left before its government-imposed restructuring deadline. In a letter to Chrysler employees obtained by the Associated Press, Nardelli pointed to the deal reached with the automaker's largest bondholders, along with a tentative new labor agreement approved by union leaders. Nardelli says the company's costs for the first quarter of this year were significantly lower than they were in the same quarter a year ago and in the fourth quarter of 2008.
Three people briefed on the deal say Italian automaker Fiat will sign paperwork by Thursday to become a partner with Chrysler. The partnership is the last piece of a huge restructuring plan needed to keep Chrysler alive. The U.S. government has lent Chrysler $4 billion and gave it until Thursday to get concessions from unions, reduce debt and take on a partner or face liquidation. The United Auto Workers is expected to ratify a cost-cutting contract tonight, and major banks have agreed to reduce Chrysler's debt. The people briefed on the deal say Chrysler could still go into a short bankruptcy if about four dozen smaller lenders don't sign onto the banks' agreement.
The Treasury Department says more than 100 applications have been received from firms seeking to manage the government program to help purchase toxic securities from banks. Treasury has said it will select at least five firms to serve as managers for the program that's seen as a crucial element in dealing with the worst banking crisis to hit the country in seven decades. The government says a variety of firms applied, from traditional fixed-income managers to real estate managers. Treasury says it hopes to make preliminary determinations on which firms will be chosen to continue in the competition by around May 15th.
The Treasury Department will boost the number of times it auctions 30-year bonds to 12 times a year in another move to cope with the government's soaring debt. The monthly auctions of 30-year bonds follow Treasury's decision just three months ago to double the frequency of the auctions from four times annually to eight. Treasury also says it will raise a record $71 billion in a series of auctions next week. The upcoming quarterly refunding will include auctions of three-year and ten-year notes.
The second annual Energy Star Sales Tax Holiday in Texas is set for Memorial Day weekend, May 23rd to the 25th. During the three-day tax holiday, Texas shoppers get a break from state and local sales taxes when purchasing certain energy-efficient appliances bearing an Energy Star label. The tax holiday applies to air conditioners priced less than $6,000, refrigerators under $2,000, ceiling fans, incandescent and fluorescent light bulbs, clothes washers, dishwashers, dehumidifiers and programmable thermostats. The state says about $3 million will be saved by consumers during the event, which is patterned after the annual sales tax holiday on clothing, shoes and school supplies in mid-August.
Royal Dutch Shell says crude prices are unlikely to rebound in the next year or so. Europe's largest oil company reports a 62 per cent slump in first-quarter profit. Net income declined to $3.49 billion from $9.08 billion a year earlier. Shell's U.S. operations are based in Houston.
BP posted a 62 per cent drop in its first-quarter net profit from this time last year — $2.56 billion, compared to $7.09 billion in the first quarter of 2008. BP has scaled back its spending target for this year because of lower crude prices.
CenterPoint Energy reports net income of $67 million in the first quarter, compared to $122 million for the same period in 2008. The energy provider recorded revenue of $2.8 billion, compared with $3.4 billion last year in the first quarter.
Waste Management, the nation's largest garbage collector, says its first-quarter profit fell 36 per cent as the recession hurt prices of recycled goods and lowered the amount of trash picked up. The Houston-based company says net income totaled $155 million, down from $241 million in the first quarter of 2008. For the quarter ended March 31st, revenue fell to $2.81 billion compared with $3.27 billion for the same 2008 period.